Hello, and welcome to the Time Inc. Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to Mr. Jaison Blair, Senior Vice President of Investor Relations and Corporate Communications. You may begin.

Please note that in addition to our release, we have slides containing supplemental information available on our website. On today's call, we will begin with some opening comments from Joe and Jeff, after which we'll open the call up for your questions.

Before we start, I'd like to refer you to page number two in the web presentation and remind you that comments today regarding the company's future business plans, prospects and financial performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations.

In providing these forward-looking statements, the company disclaims any intent or obligation to update them. For information on important factors that could affect these expectations, please see our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 19, 2016, and our subsequent filings made with the SEC.

Additionally today's remarks will include discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles. Reconciliation of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or in the presentation materials on our website.

And with that, I'll turn the call over to Joe.

Joseph A. Ripp - Chairman & Chief Executive Officer

Thank you, Jaison. Good morning and thank you for joining the call today. We reported second quarter total revenues of $769 million, adjusted OIBDA of $89 million and adjusted diluted EPS of $0.22. Our second quarter financial results reflect our strategy to offset the challenging secular headwinds we face in Print Advertising and Circulation with other sources of revenue including Digital Advertising combined with cost savings and efficiency efforts.

Jeff, will provide further details of Time Inc.'s financial results and the outlook during his prepared remarks. We are entering an era when mobility and Internet technology will touch every aspect of our lives. For 20 years, our industry has been at the center of the convergence of media, technology and communications.

In a world that is increasingly becoming mobile first and is dominated by Facebook and Google, the pace of change is accelerating. There is a tremendous sense of urgency to our transformation work. We completed our spin-off just over two years ago and began our transformation journey. Early on we understood that we had to shed our siloed organizational structure.

If the solution to the convergence of media, technology and communications is integration and scale. The now siloed organizational structure was holding us back. We face the classic Innovator's Dilemma, make incremental change that avoids dislocation and gradually manage down a declining business or pursue a more aggressive change to integrate the company across sales, edit, digital, brand management and native solutions and potentially unlock innovations, synergy and scale. From the beginning, our choices have been to manage the company for long-term success. Even when it may cause some short-term pain.

On July 13, we announced an extensive realignment program. It included very important changes to shed our siloed organizational structure in order to more fully integrate the company. As with any major transition, near-term dislocation could occur and has, as indicated by the impact on our second quarter revenues and our reduced 2016 outlook.

We believe it's the right time in our journey to make these changes and that they are the right moves for the long-term transformation of Time Inc. And despite, the dislocation from these changes as well as the impact of Brexit, we still expect to achieve revenue crossover this year.

There are four primary objectives in this extremely important realignment plan. The first has to do with advancing the work we've been work doing on our advertising sales organization. Our siloed sales structure was extremely inefficient, in many cases we had 20 different sellers calling on the same account on a brand-by-brand basis. The problem with this approach is that no individual brand could approach an advertiser with the scale of Time Inc.

Thus we were primarily selling ad pages and impressions rather than comprehensive advertising solution. On July 13, we announced that our entire U.S. sales organization would shift to a centralized reporting structure and away from reporting to the individual brands. This new structure will help to resolve many of the inefficiencies in our sales coverage model. It will also enable our ad sales and marketing teams to work more effectively across brands as one Time Inc. and to provide creative solutions to marketers.

To achieve these end goals, our new sales structure will be configured to serve advertising market in the following three distinct ways. We announced that we'd be extending our category approach to include all of our largest partners, not just the three categories we launched in April. This represents approximately 60% of our U.S. advertising revenues. It will make it easier for our clients to buy across our portfolio and we will provide them with 360 degree solutions including native, custom content, targeting and live media.

We announced that we would introduce clusters to serve endemic brand advertisers with premium content solutions. These teams will service brand ambassadors and promote brand specific advertising solutions. We also announced that we will establish dedicated digital sales teams to serve digital-first clients and to support integrated sellers within the categories.

It is important to have digital experts who can build businesses across mobile, social platforms, targeting, digital video, et cetera. Also, the rhythm of digital sales is vastly different from weekly and monthly magazines. Our monthly magazine sellers are currently working on October issues. While our digital sellers have opportunities to sell advertising solutions right up to the close of business.

We believe this new structure will enable us to drive more revenue from existing advertisers, have more clarity and focus within our reporting structure and gain share within the categories by developing deep industry expertise.

The second primary objective for making these changes is to advance the work we've been doing across our editorial organization. If you were building Time Inc. from scratch today, you'd have a common technology platform and shared resources, not largely separate brand silos that use different tools and processes. We started this editorial transformation work under the leadership of Norm Pearlstine, who joined me soon after I returned in 2013.

Norm returned to Time Inc., where he had served as Editor-in-Chief from 1995 to 2005 to pursue three objectives. Work on the spin-off from Time Warner, break down the historical barriers between Time Inc.'s editorial and business sides, enabling our editors to collaborate more closely with their business colleagues and to help find a successor.

Norm began the process of hubbing our editorial teams with the formation of the Time Inc. Food Studios in Birmingham, Alabama and he moved Time Inc. to common photo rights and rates.

On July 13, we also announced that we were moving to a unified editorial operation under our new Chief Content Officer, Alan Murray. Alan is an award-winning journalist, who was instrumental in creating digital-first cultures at The Wall Street Journal, the Pew Research Center and at Fortune. And he has the skills and experience to bring that thinking to all our Time Inc. brands.

While our audiences are the largest they've ever been, most of the growth is coming on mobile devices, we're are up 29% over the last 12 months. Uniting our editorial operation is about making us mobile-first in the ways we think about servings those audiences.

The editorial transformation is also about offering video at scale. Video production has become increasingly inexpensive and ubiquitous. We will develop common processes and tools to continue to grow video audiences across all of our brands and we will continue to produce our print magazines with great care.

Our new editorial structure enable us to create hubs for sharing content resources. We continue to see opportunities to consolidate functions to allow our edit teams to be more productive and for our hubs at the same time to more effectively serve mobile and digital audiences.

Further, by moving to common technology and tools, we can share content and common rights and we can more easily bring the best of Time Inc. to every site and brand. Alan is fully committed to the editorial independence and journalistic integrity of Time Inc. and to building a sustainable model of high-quality journalism and storytelling.

The third primary objective of the realignment is to position ourselves to benefit from the bifurcation of digital advertising market, performance at one end an ultra-premium content at the other. Time Inc. can now cover the entire consumer path to purchase. The Viant acquisition enables us to target specific individuals and customize marketing messages across devices with enhanced data.

We are very pleased with the Viant team and we continue to expect it to generate well in excess of $100 million of incremental revenue in 2016. Further, it provides us with people-based identity targeting for advertisers, similar to services offered by Facebook and Google.

In addition, we are increasingly hearing from CMOs that they want to become storytellers, they want to create content for their brands that engages their target audiences and helps them break through the clutter.

Over the past year, we have built substantial native capabilities across our portfolio and at The Foundry in Brooklyn. For Time Inc. to scale this business and to become a major player, we needed to make certain structural changes.

On July 13, we also announced that the Foundry, our state-of-the-art creative lab and content studio, would be led by Jen Wong, our President of Digital. Under her leadership, Jen has consolidated all of our native teams at The Foundry. The key to providing great native content, for which advertisers will pay a premium, is to speak the language of the advertiser and to do it in the voice and the design sensibility of the brand.

We believe our new category-focused structure enable us to do this at scale, operating in centers of excellence by advertising category, while also being closely integrated into the editorial teams of the brands. We have also structured our digital edit, product and sales teams to operate more nimbly across the portfolio. Now we can much more easily deploy common content strategies, advertising products, standards and tools.

Our fourth primary objective, to simplify the reporting structure for the brand teams. On July 13, we also announced that all of our U.S. brands would now report to Rich Battista, as EVP and Brand President. Rich is now the primary steward of the U.S. brands and he will continue the work he started at People, EW and Sports Illustrated to transition them to becoming truly multimedia, multi-platform brands.

By clustering our brands under a single leader and by simplifying the organization, we can centrally orchestrate new business development, share resources across brands and drive incremental revenue through new businesses, platforms and brand extensions. Clustering the brands also enabled us to more effectively target efficiency initiatives across the organization.

But before I turn the call over to Jeff, I want to share a number of second quarter highlights. During the quarter, we added a key transformational leader. Leslie Doty joined Time Inc., as Executive Vice President, Consumer Marketing and Revenue.

Leslie brings extensive management and marketing expertise, having led consumer marketing transformations at companies that includes MasterCard, CVS, Citibank and Trusted Media Brands. At our core, Time Inc. is one of the largest direct marketing organizations in the U.S. media industry. We are a best-in-class subscription marketer and we are testing ways to elevate the way we market by using Viant's enhanced data in conjunction with our powerful offline and online databases. On balance, it is about having a 360 degree view of our customers and prospects. By knowing our customers better, we can create stickier relationships and introduce other types of products and services.

And despite the headwinds of declining print advertising spending, print magazines remain one of the most powerful forms of media for advertisers. Our average monthly U.S. de-duplicated print audience reaches over 120 million people and magazines deliver the highest ROI to advertisers of all media.

On June 14, Nielsen Catalina Solutions published an independent comprehensive report on advertising and ROI across media platforms. This groundbreaking study measured the incremental sales attributed to advertising and compared those returns across display, TV, mobile, digital video and magazines. And as we expected, magazines delivered the highest return on advertising spend of all media platforms.

I also want to talk about the power of premium content. Every day Time Inc. creates cultural moments that get people to stop, take a break from their scanning behavior and engage with the content and associated marketing messages. It is why our advertisers are the largest – our audiences are the largest they've ever been and why advertisers consider Time Inc. the ultra-premium media network.

On July 14, comScore provided new evidence for advertisers that despite the growth of programmatic advertising, media quality clearly matters in advertising effectiveness. comScore published a new study that found that premium publishers were three times more effective in driving mid-funnel brand lift metrics such as favorability, consideration, and intent to recommend. In other words there's a clear connection between the value delivered to advertisers on our premium quality media brands and our trusted environments.

Finally, Time Inc. brands translate very well into sight, sounds and motion. With TV audiences fragmenting and shrinking, we believe the TV ecosystem has broken wide open and we are already participating in this disruption as advertising shifts dollars into digital video and OTT offerings.

On July 14, the Television Academy announced that Time's original documentary video series, A Year in Space was nominated for an Emmy Award in the Outstanding Short Form Nonfiction or Reality Series category. The Academy's nomination illustrates how Time Inc.'s brands and storytelling are being re-imagined across multiple platforms.

This morning I kicked off my comments by saying that mobility and Internet technology are going to touch every aspects of our lives. Every industry and every incumbent within the global economy are finding themselves defending against new, lower cost digital-first competitors. This is the key theme of the future of Time Inc. We believe our globally recognized brands, our premium content and our strong relationship with advertisers make us a natural partner or new entrant for the next phase of disruption.

Many of the investments we've been making over the past two years are about planting the seeds of becoming a disrupter and capitalizing on markets that are opening up to new competitors. For example, social media and media-first offerings are about creating global content brands.

Our new digital video Facebook Live in our OTT offerings are all about disrupting television. Viant is about targeting down to the individual level. The Foundry is about providing creative solutions to advertisers that are finding it harder and harder to break through to their target customers and SI Play is about enabling mobility and Internet technology in youth sports. We are transforming Time Inc. to participate in larger global opportunities. We're infusing digital and entrepreneurial culture into our day-to-day operations. And we are positioning ourselves to benefit from the next wave to disruption.

And now, I'd like to turn the call over to Jeff to discuss the financial details of the second quarter as well as our outlook.

Thank you, Joe, and good morning. As Joe mentioned our Q2 results reflect our strategy to offset the challenging headwinds we face from Print Advertising and Circulation with other sources of revenue including Digital Advertising as well as cost savings and efficiency efforts.

Please turn to 2Q 2016 financial highlights section on slide three of the presentation deck. Total revenues declined 1% during the second quarter. Total advertising revenues increased 1% year-over-year with Digital gains outpacing Print declines. Digital advertising revenues increased 65% during the quarter.

Operating expenses were lower than expectations and more than offset the revenue headwind during the second quarter. Second quarter adjusted OIBDA was $89 million versus $117 million last year. We ended the second quarter with cash, cash equivalents and short-term investments of $380 million or $3.78 per share. During the second quarter, we bought back $34 million of stock, or just over 2% of our shares outstanding, with $145 million remaining under the authorization as of June 30.

We also bought back $10 million face value of our senior notes and have $80 million remaining under the authorization. We have revised our revenue outlook for 2016, we now expect annual revenue to be flat to up 1.5% year-over-year, and this includes both the ongoing adverse impact of the transition of our sales organization and the adverse impact of Brexit.

In conjunction with our organizational realignment program, we expect to incur approximately $35 million of restructuring costs for actions identified to-date. We now expect 2016 adjusted OIBDA of $400 million to $430 million. And I'll provide more detail on our outlook in a few minutes.

Before getting into the details of the second quarter, I want to provide an update on the impact of Brexit. Time Inc. UK represents approximately 12% of our revenues. We estimate that FX volatility following the Brexit vote is likely to adversely impact total revenues in the second half of 2016 by approximately $20 million and adjusted OIBDA by approximately $5 million.

Virtually, all of Time Inc. UK's revenues and costs are in British pounds. So the currency impact on revenues are somewhat offset by the currency impact on expenses. Regarding our UK pension, preceding the sale of the Blue Fin Building in the UK, we negotiated a long-term funding plan with the trustees of pension. Additionally we repatriated the majority of the proceeds from the sale of the Blue Fin Building at the time of the transaction.

Now please turn to advertising revenues on slide four of the presentation deck. For the second quarter of 2016, total advertising revenues were up 1% to $426 million. Print and other advertising revenues declined 13% to $299 million. The new sales structure is expected to help resolve inefficiencies in our sales coverage model. When we were analyzing potential sales structures, we decided that we were- that there were real potential benefits to move to a category-based approach.

In addition, all of our major competitors are selling based on categories. And the agencies and advertisers are increasingly set to buy this way. And as Joe mentioned the decision to realign our sales organization is expected to result in pipeline disruption through the rest of 2016. On the other hand, we are seeing some sequential improvement of Print Advertising booking trends for the third quarter.

Turning to Digital Advertising revenues, total Digital Advertising increased 65% to $127 million in Q2. The leading driver of our digital growth in the second quarter was the benefit of the Viant acquisition in March.

Excluding the Viant acquisition, Digital Advertising revenues would have increased approximately 10%, which represents a sequential improvement from the first quarter, despite the adverse impact of the sales transition. We currently expect that our total Digital Advertising revenue growth rates will continue to build over the course of the year.

And now let's turn to circulation revenues on slide five. For the second quarter of 2016, subscription revenues declined 7% to $154 million. This decline is largely attributable to lower consumer demand for print subscriptions. Even though the subscriber acquisition environment remains challenging, we continue to have a large base of high value loyal subscribers with both high and stable renewal rates.

Newsstand revenues declined 10% to $74 million. The net impact of foreign exchange on newsstand was approximately $3 million of unfavorable comparison for the second quarter. Despite the still challenged newsstand trend, we responded quickly to the untimely deaths of Prince and Muhammad Ali. We provided extensive coverage with print, digital and video attributes and our special features on Prince at newsstands in People, Entertainment Weekly and Time Inc. Books were the highest selling issues year-to-date for these brands.

Now please turn to slide six of the presentation deck for other revenues which included marketing and support services provided to third-parties, branded book publishing events and licensing. For the second quarter, other revenues rose 8% to $107 million, driven primarily by the acquisitions of inVNT, Sports Illustrated Play and the UK Craft and Cycling Events businesses.

As we stated before, we continue to see opportunities to invest to extend brands into new revenue streams to help drive top-line crossover. These are adjacent revenue opportunities because they're designed to be natural extensions of our current capabilities, brands and assets.

And now, let's turn to the operating expense slide, slide seven. For the second quarter of 2016, operating expenses rose $30 million to $687 million. This includes transaction-related expenses of $7 million, compared to $1 million in the comparable quarter last year.

Transaction-related expenses are excluded from our adjusted OIBDA calculation. It also includes approximately 700 basis points related to our growth initiatives, operations of newly acquired businesses, the closure of All You, and the sale of This Old House and FX [foreign exchange].

Now please turn to slide eight of the deck, which shows that second quarter 2016 adjusted OIBDA was $89 million. Time Inc. reported a adjusted diluted net income per share of $0.22 for Q2 versus adjusted diluted net income of $0.27 per share for the comparable quarter last year.

Now let's turn to slide nine of the presentation deck. We ended the quarter with $380 million of cash, cash equivalents and short-term investments. During the quarter we paid a dividend of $0.19 per share or $19 million, and today we declared a quarterly dividend of $0.19 per share indicating an annual dividend yield of approximately 4.9% based on yesterday's closing price.

And as we've communicated previously, the intent to manage to a target leverage ratio range of between 2 times and 2.5 times, net debt-to-trailing 12-month adjusted OIBDA. At the close of the quarter, our net leverage ratio was 2.19 times.

Now please turn to slide 10, for our outlook and pacing. For full year 2016, we now expect total reported year-over-year revenue to be flat to up 1.5% year-over-year. In 2016, we expect our growth initiatives and acquisitions excluding Viant to contribute approximately 300 basis points of incremental revenue.

And as Joe mentioned, we continue to expect Viant to contribute well in excess of $100 million of incremental revenue in 2016. This outlook includes the greater than expected impact of foreign exchange volatility associated with the Brexit vote.

We estimate the total negative impact of FX on 2016 revenues will be approximately 150 basis points year-over-year. And that also includes the adverse impact of closure of All You and the sale of This Old House, which approximates another 150 basis points. As I mentioned earlier, we expect to incur a restructuring charge of approximately $35 million related to our organizational realignment.

Our 2016 adjusted OIBDA outlook range is now $400 million to $430 million. Our 2016 full year outlook includes approximately $20 million of net P&L investment associated with various growth initiatives.

For full year 2016, we estimate capital expenditures of between $95 million and $105 million. The real estate component of CapEx is estimated to be $50 million driven largely by capital expenditure payments related to the build out of our new Downtown headquarters, our new office space in Brooklyn and ongoing real estate optimization initiatives. The core and growth components of CapEx are expected amount between $45 million to $55 million.

For the third quarter of 2016, we estimate the following; total revenues to be roughly flat; advertising revenues to be up, mid to high single-digits; subscription revenues to be down, low double-digits; and in general our core subscription revenues are declining mid single-digits; in the third quarter there's expected to be approximately 400 basis points of adverse impact from FX and disposition, and approximately 250 basis points of the adverse impact from timing of revenues impacting our agency business. So the fourth quarter pacing should be closer to mid single-digits even with the adverse impacts of FX and disposition.

Newsstand revenues to be down approximately 20%, as we expect approximately 800 basis points of adverse impact from FX and dispositions. Other revenues to be up low single-digits and operating expenses to be flat to up low single-digits with acquisitions and growth initiatives being offset by cost saving initiatives, dispositions and FX. We'll continue to look for opportunities to optimize the portfolio, drive cost savings and efficiencies while we deliver shareholder returns including return of capital.

And with that I'd like to turn the call back to the operator and we'll take your questions.

Question-and-Answer Session

Operator

Thank you. Our first question is from Doug Arthur from Huber Research. Your line is open.

Douglas Middleton Arthur - Huber Research Partners LLC

Thanks. Jeff can just, sort of, break down the components of the change in revenue guidance? You mentioned, I think 150 bps from FX and 150 bps from dispositions, and the dispositions were not part of the previous 1% to 5% guidance range in revenues?

They actually were included so what we're saying is that in the previous 1% to 5% we had anticipated dispositions, we wouldn't have anticipated Brexit, so there is further impact there. So even now the current guidance is flat to up, it is being adversely impacted by another 100 bps – well, actually by another, call it, three quarters of a basis point to the previous forecast but 150 bps for the full year on FX.

Joseph A. Ripp - Chairman & Chief Executive Officer

And Doug, the greatest portion of the change is really from the sales force reorganization. When we went through the process of getting ourselves aligned in the right way, there certainly was some disruption. We have changed the allocation of job responsibilities for over 500 people in our sales and marketing organization and that created the disruption that we've suffered.

Douglas Middleton Arthur - Huber Research Partners LLC

Okay. And just as a follow-up, Printing down 13% in the second quarter clearly was worse than you initially anticipated, I assume.

So how much of the lower guidance is due to lower Print and what's driving that?

Joseph A. Ripp - Chairman & Chief Executive Officer

I think, it's really coming through from the disruption of the sales force change, when you've had so many changing accounts, trying to sort through what group they want to work in, what brand they're going to come from to what group they're going to go, are they going to stay at the brand level, go at the top, we basically distracted our sales force a little bit greater than we certainly had anticipated, but it was absolutely a necessary change.

I've probably spent more time as a CEO in this company than I know of any of the other CEOs with our advertising partners, and I know that the opportunity for us to present comprehensive solutions to our advertisers is there, but when we were going in with 20 different brands trying to sell 20 different solutions, we were often tripping over each other.

And one of the things that I found very clearly in my conversations with CEOs and CMOs was that, they were looking for really interesting proposals from us, proposals that cut across our brands, proposals that were more creative in solutions, native solutions, video solutions and having 20 people call on one account just didn't do it.

So we are now really forming our sales force organization aligning the way many of the other media companies are. Going to these customers with broader solutions, selling Time Inc., the size of our digital audiences. No doubt that our digital audiences are up to the scale they are over, at about $115 million in the U.S. we're over $150 million worldwide in digitally uniques.

Now that we have that size and scale, we can go to the marketplace with a much more comprehensive solution. And more importantly, I really wanted to focus on our coverage model, because when you have 20 people calling on one account, you don't really get the benefits that you can, so now what we're going to do is free ourselves up to cover even more accounts and be much more comprehensive, because we can redirect those people and make sure that we have the right number of people and the right number of accounts for the size and complexity of the advertiser and making sure we're covering all those people that we haven't covered before.

Douglas Middleton Arthur - Huber Research Partners LLC

Okay. Thank you.

Operator

Thank you. Our next question is from Tim Nollen from Macquarie. Your line is open.

Good morning. Thanks. I wanted to follow-up again on the restructuring issue, I think I was surprised and I think a lot of people I speak with were surprised that another big restructuring coming on the heal, so far the office moves last year after your Open House. So my question is, is this like a response to what was not panning out well enough this year or is this, kind of, a more definitive restructuring and can we hope that there won't be more of these restructurings to come.

Joseph A. Ripp - Chairman & Chief Executive Officer

This was not a response to what was happening this year. This was a response to the continuing trends of the decline of the business overall. I mean if you look at where we're going, going forward, we've said all along, we're going to be selling native solutions, video solutions, we're going to be selling a lot more digital solutions. We are using targeting and data for our customers and we were going out into the market as 20 different brands in the U.S. trying to sell those solutions and no one brand was big enough to really get the attention of our customers.

So this was not in any response to any current market conditions or any shortfall this year. It's really a response to the long-term trends of the industry. And we've been looking at the success of some our competitors who are going at, with the comprehensive solutions.

So we understood that the best way for us to be successful into the future, was to take the change that we needed to make, combine the sales forces on the categories, also have the brand-dedicated digital sellers and make sure that we were going into the marketplace with much more comprehensive wide spread solutions to our advertisers. I had a very significant advertiser, who spends a considerable amount of money, with me, said to me one day after we called them, none of your people ever reached and talked to me, and that was a CMO of a company that spend an excess of $20 million a year with us.

And it's in part because, they were spending in small buckets, we're now able to reach out to those people and say to them, okay, we can work with you as Time Inc., and we can bring you even greater solutions. So the goal is to really create bigger, larger contracts with these people as all of our competitors are doing.

Alan Murray - Chief Content Officer

Joe, can I – this is Alan Murray. Can I jump in here quickly?

Joseph A. Ripp - Chairman & Chief Executive Officer

Sure.

Alan Murray - Chief Content Officer

Because I want to make clear, it's a big opportunity on the sales side, it's also a big opportunity on the editorial side. We've made a lot of progress in the last two years, but I think there's a lot more we can do, we have been organized around magazine brands and the way you organize to attack an audience that's consuming on mobile phones, is going to be very different, and this new structure gives us the opportunity to do that.

So if you take – just to throw out one example, if you take a subject like health and wellness, which is one of the cornerstones of what Time magazine does. We have a magazine called Health, we have a magazine, Cooking Light that has great content on healthy eating, Fortune is starting a new conference this year called Brainstorm Health that's going to look at how technology is transforming the healthcare industry.

And figuring out how you can bring all that together to really attack the opportunities in mobile, in social, in video is a big challenge and this organization is designed to let us do that.

Joseph A. Ripp - Chairman & Chief Executive Officer

Right. The reason we launched it right now is, it's clearly, if you look at the journey we've been on, we started out with a awful lot of cost containment which we've done, we looked at asset monetization – we have done – but we also had a focus on building out, as I said, those digital audiences getting those up, getting our mobile audiences, creating video products, really working very close with advertising partners to prove that our native content solutions work, making sure that we had targeting capability with the acquisition of Viant.

Now that we have a full range of solutions, we can sell to our advertisers this way; before we didn't have much to sell beyond brand advertising. But now that we've got the full range of solutions, it allows us to go to market as a scale player, we're clearly a scale player in the marketplace and we weren't acting that way in our sales force and our sales approach and we now have the ability to do that and that's why we made the change.

That makes sense. If you can think of this then as a definitive, kind of setup of Time Inc. for the future, can we look then to improvements in revenue and margin in 2017, and I'm not going to expect you to give guidance on that, but just, can we expect a quicker turnaround on that now into 2017?

Joseph A. Ripp - Chairman & Chief Executive Officer

Certainly – we're certainly not forecasting 2017 at this point, as you appreciate. But certainly we did this to improve revenues going forward, to find greater solutions, bigger deals with customers – the one thing that is pretty clear in the marketplace, CMOs are trying to do bigger and bigger deals with fewer and fewer players.

Now if you're a sub-scale player in the marketplace right now, it's pretty difficult out there, you're having a lot of trouble. But we're also all competing against two giants that are sucking up all the digital revenues; that's Google and Facebook. And they're going to the marketplace with customer solutions, with digital and industry solutions and that's what we're competing against.

As Alan pointed out a lot of our traffic is growing in mobile, our mobile traffic is up pretty dramatically year-over-year, as you've seen in some of the disclosures we've made. Alan and his team are going to be working on mobile for us. This gives us an ability to really go after the accounts and talk to our advertising customers, the way they're being spoken with, with the other large players in the marketplace. So I think it really does position us to be in a much better place than where we were.

Alan Murray - Chief Content Officer

And Tim, I'll jump in here to echo what Joe said, we're not providing guidance per se but based on what we have – are looking at, looking at the trends, we are confident that we'll see top-line crossover again in 2017, and that we will see incremental adjusted OIBDA, growth, obviously not guiding but there's nothing in the forecast that would – as a result of any realignment that probably change that view.

Joseph A. Ripp - Chairman & Chief Executive Officer

And the other thing, I've got hopeful with – I think there's been a lot of silliness in digital metrics of what people are counting as working. The reality is that – the great news about the last two reports that came out with comScore and the other one is that, it's proving – it's really proving out what we've known all along, that magazine advertising really does work, that was a totally independent study that said it, it was the highest rate of return in any form of media and that premium content works.

I've joked for years, that five ways to feed your gerbil doesn't sell Toyotas, but the reality is premium content, the reason it works is because it engages, and advertisers are looking for an engagement, in a world where content is being flashed by at rapid paces and people aren't engaging, our content does engage; and what's happening is that advertisers are starting to realize that premium content engages, that magazine print advertising really does work, a lot of these digital things they chased over the years don't, and they're starting to come back. And we're really hopeful that we can really deliver those messages much more effectively, clearly than the industry has in the past.

We've allowed our advertisers to be distracted by shiny objections. And I think what's happening is the research is starting to show that the traditional forms of media that we have, as well as the new ones we're creating, the premium content, it really does work, it really does help them get their message across.

Right. No I certainly agree with you on the digital metrics and on the value of content. So thanks for the comments.

Operator

Thank you. Our next question is from Barry Lucas from Gabelli & Company. Your line is open.

Barry L. Lucas - Gabelli & Company

Thank you and good morning. With this current realignment and recent acquisitions including Viant, I was wondering Joe what do you think is missing from the portfolio or from your quiver? Are you strategically complete at this point or is there something else you have to go out and buy or build?

Joseph A. Ripp - Chairman & Chief Executive Officer

Well, I think what you're going to see probably over the next year or so, as we get into more and more solutions with our advertisers, we'll probably be looking at hiring more custom content solution people that can work with us. Our Foundry has gotten a tremendous amount of interest from our advertisers. I can't tell you how many times we have CEOs visiting us out there, talking about how we can help them breakthrough their messages and CMOs – there's almost a tour every day out there, of somebody new coming through.

So I probably – we're probably building up size and scale in that area. There are digital technologies that are pretty interesting to us that we'll probably be able to add. The one good thing that's going on and that's interesting in the marketplace right now is, as you know, there was an awful lot of ridiculous valuations going on in anything named digital.

Those valuations are becoming much more realistic right now. And the great news for us is, as we constantly look in the marketplace, we brought in Erik Moreno, who's working with us and looking at the marketplace for new opportunities. There are some things that are pretty interesting at respectable prices, like the Viant acquisition has really contributed very well for us and we bought that at a very good price, as you know. We think there are things out there.

So as there are technologies that present themselves to us that can add to our audiences, that can add to our digital capabilities, our targeting, our messaging capabilities; add to our video capabilities or add to our abilities in the – down at the creative stuff out in Brooklyn – what is that? The Foundry, I'm sorry, at The Foundry in Brooklyn.

As we see those kinds of things, those are kind of areas we'd be looking at. But there's nothing major that I'd say we've got a hole in, we just see opportunities for growth and when those opportunities present themselves, that really good pricing will work because that's the opportunity for us, we also see some opportunities in events, in conferencing. Our events and experiences business is up 70% from last year. So we're going to continue to drive into that and go after that and I think there's real opportunities for us.

Alan Murray - Chief Content Officer

Yeah, Joe, if I can just chime in on that, I mean I spent a lot of time at the Wall Street Journal building up the conference business there and was surprised when I got to Fortune to discover that we actually had a better ability to pull in CEOs than the Wall Street Journal did.

And I think that gets me under the power of the brands that exist in this company. I was always a little surprised when I walked into a CEO's office to see when you look at the wall, it wasn't the front page of the Wall Street Journal that was framed on the wall, it was the cover of Fortune magazine and the same thing is true with elite athletes and Sports Illustrated, the same thing is true with celebrities and People, the same thing is true with politicians and Time or restaurants and the Food & Wine list or resorts and Travel + Leisure, these brands define American life in many ways and conferences is one of the powerful ways to take advantage of these people who want to – we have a great convening power and people want to participate in our events.

Barry L. Lucas - Gabelli & Company

Thanks for that.

Operator

Thank you. Our next question is from Kyle Evans from Stephens. Your line is open.

Kyle Evans - Stephens, Inc.

Hi, thanks for taking my questions. You mentioned that there was an extreme distraction of 500 sales people during the quarter and that, that was the primary driver of print ad mess. How is that distraction, if you will, pacing in the third quarter? When do you expect it to clear? And I have some follow-up questions.

Joseph A. Ripp - Chairman & Chief Executive Officer

Well, first I didn't say it was an extreme distraction, I said there was an distraction. But certainly when you take 500 odd sales people and marketing people and you change their jobs, you change their accounts, there's going to be some slippage in that. It happened a little bit strong – a little bit higher than we thought, it was earlier than we anticipated. But we did most of that work in June. We did a little bit more in July, we've gone through some more right now, what we are seeing, third quarter Print trend is up slightly, we are taking into account some distraction for the second half of the year, we are seeing the shoots sprouting on the three categories we started already.

Those seem to be showing some very promising signs with our conversations with our advertising partners. We've announced some more categories, and we've also announced some brands. So I would think we'll be clear through that dust clearly by walking into 2017 as people feel pretty good about their accounts, their relationships what they're doing.

What frustrated me, quite frankly, when I first came back is that my sales colleagues here would always talk about how we're doing versus Meredith or Communist or Hearst and I kept saying I don't care about that, I care about what percentage of the advertising dollars that we are getting. We're not competing against a ship which is shrinking in the size of its pie, we're competing against all the other dollars going to other places.

The most interesting part about this transition is, now my sales leads now know exactly what the spending is across all categories of that advertiser and we're competing against all of those categories.

Now, as I said before with disruption going on in television, there's a lot of television dollars being put up for grabs, there's a lot of transfer going from traditional TV to online video. There's a lot of opportunity for targeting, for data. We have some of our largest beauty advertisers now looking at targeting a data.

Now we can work with them in a different way and any one individual brand just didn't have the resources to do that, but we can now assign the resources to our advertising partners and say, how can we help you be successful in a much more dramatically different way than we were before, we're no longer talking about how many pages Condé Nast got. We're talking about how much of your advertising are you spending and what share are we getting from that and that's the conversation that's dramatically different. And that's why I'm really hopeful that the seeds that we're seeing sprouting right now will continue into 2017 and will hopefully change the trajectory in this organization.

So, Kyle, just to give you a little color on the bookings. Our monthlies are pretty close to closed for Q3. Those bookings are definitely improved, since Q2. And for sure, we saw a disruption in the month of June. So, looking at bookings right now, in Q3, we definitely see an improvement. But, as Joe had said, we want to be transparent that we have created disruption. We saw a disruption in June. And it is hard to predict the full impact, but we do see incremental improvement and the bookings again are significantly better than the Q2 trends.

Joseph A. Ripp - Chairman & Chief Executive Officer

When I first came back, a lot of people, consultants, advisors everybody was pushing me to do this right out of the gate, but quite frankly, we didn't have the other things to sell, we didn't have the range of services to provide. So all we would have done is just created disruption for probably very little game, but I've been very satisfied with the growth of our Digital properties, our video capabilities, our native capabilities, very happy with the Viant acquisition and the data and targeting capabilities it brings us, that's why we did it now. We needed to have a full suite of services to sell to these people, that we could have a different kind of conversation and that's why we did it.

Kyle Evans - Stephens, Inc.

Which is a great segue to my second question, which was, it looked like Digital grew around 10% ex Viant.

Joseph A. Ripp - Chairman & Chief Executive Officer

Yeah.

Kyle Evans - Stephens, Inc.

Would you expect this new structure and strategic direction of the company to help benefit – would you expect that to benefit the Digital piece as well and do expect growth rate?

Joseph A. Ripp - Chairman & Chief Executive Officer

Absolutely. One of the problems we've had in the past is we had mostly Digital and Print sellers combined selling – and then the Print sellers would sell the same thing as the Digital sellers. We now have dedicated Digital teams. We're actually – by doing that we're able to attract a much higher quality digital seller. And that's been proven out in our hiring right now. We're really ramping up Digital sellers and the number of people that we're going to bring on into the corporation. We're ramping that up pretty dramatically right now.

But the opportunity for us, I said in the script, that the monthly sellers are off during October, November right now. And so just the pace of sales is different in Digital where a Digital seller can sell something on June 25 and fulfill it by the end of the quarter, where a Print seller, a monthly print seller, he's off selling October, November, December right now. So the pace is different.

So we really do believe by bringing together the Digital sellers under one roof, which we've done, that not only will we be able to focus more on the Digital pace, we'll focus on calling on those Digital-only agencies, which we hadn't done such a good job of in the past, as I started looking on my coverage model.

But more importantly working with Jen Wong and Alan and others at The Foundry, we're going to be creating a lot of new great products and services, so that – arm those digital sellers would go something to sell into the marketplace. So you may see – somebody asked me about acquisitions before, you may see a couple of acquisitions tuck-in which give us some products and services that really enable our Digital sellers to sell.

Now that our audiences are so large, about $115 million, we can create products and services to cut across the digital sales, we can deploy them very quickly. In the past, I had to go talk to all the brands in the company to get them to, kind of, be unified. Now we have a central Digital team that can create products with great offerings, great pricing structures and roll it up very quickly. So I do expect an acceleration of Digital as a result.

Kyle Evans - Stephens, Inc.

My last question is on subscription revenue which was down 7% in the period. Could you talk more specifically about pricing and volume trends inside that line item and I'm specifically interested in the same magazine sub-volume trends that you're seeing.

I would say those trends are – have being pretty consistent. I'd say, we had some modest rate base adjustments going into the year. We're looking at the quality of the book. We're look at the renewals. I would say, overall we're holding rate fairly well.

Whereas Joe mentioned on previous call, we've done some price testing with people in order to keep that book continuing to be stable and those seem to be successful. So, I'd say all-in-all we're comfortable with the mid single-digit rates. And importantly, we're holding on our renewal rates across the book as well.

Joseph A. Ripp - Chairman & Chief Executive Officer

Right. And if you look at subscription side of the business, so subscriptions are basically stable around $30 million. Renewal rates are stable, they are pretty strong. We're pretty happy with those. What we're really doing is, we need to spend more time looking for new customers, sold digitally, where currently digital sales are about – I am sorry, the digital sales – I had the number.

If we look Digital sold its about 31% of the file, our credit card renewal is about 20% of the file and other opportunity we have is Leslie Doty comes to us and we are working very closely with Jen Wong and Leslie to use Viant to see if we can really ramp up our Digital sold, because Digital sold subs are a lot more – less expensive than the sold through direct mail vehicles, and we're also – because Viant has targeted capability into the home and it gives us the name and the address of the consumer, I am hoping it actually enhances my mailing capability, because if we really get Viant working for ourselves as a Digital seller of subscriptions, remember we sell subscriptions for a lot of the industries through our Synapse joint venture in Stamford.

if we get Viant working for ourselves, for Digital subs and we're working very heavily on that, it's one of the reasons Leslie is here, we can then work it also for the rest of the industry and make a lot of profit on that. Because our sales of subscriptions for the rest of industry – so Synapse is highly profitable. So we believe that we can get this targeting capability down, use the name and address that Viant has, get better at selling Digital subscriptions that we could be the Digital seller for the rest of magazine industry.

In addition to that if we get better with our enhanced data that we're building and Viant and we start selling our subscriptions and magazine subscriptions, the last I looked, there's a whole lot of people trying to sell subscriptions these days. And a lot of people are moving to the subscription base form of selling their products and services because they realized it's highly profitable.

So we're also looking at trying to build the capability to say, well, if we get really good at selling ourselves digitally, and we can use Viant's targeting to sell subscriptions for ourselves and the rest of the industry, there's a lot of other people out there like Home Box Office, Netflix and others that are desperately trying to sell new subscriptions and we could really help them do that.

And so, I look at that as a potential opportunity for us. We have not built any of that into our forecast or thinking, but there's an opportunity there, because we are one of the biggest and largest direct subscription marketers in the United States of America. So if we can do it for ourselves, we can do it for the rest of the industry. We think as more and more people are moving toward subscription models, there may be an opportunity for us to sell there also.

Kyle Evans - Stephens, Inc.

Thank you.

Operator

Thank you. Our next question is from Michael McCaffery from Shenkman Capital. Your line is open.

Michael Francis McCaffery - Shenkman Capital Management, Inc.

Thanks for taking my question. I was hoping you could just expand on response to Tim's earlier question about the realignment of the sales force that you've been describing. If I look back at some of your prior comments through 2015, I guess I was under the impression a lot of this integration had already been done.

I think that was referenced to selling Time Inc.'s to a single media network back as far as Q1 of 2015. And then even during your fourth quarter conference call, you'd talked about how the optimized and integrated sales approach was starting to have effect. I guess I'm just a little confused as to what today's announcement as far as sales structure realignment. What this means vis-à-vis your prior comments along these lines?

Joseph A. Ripp - Chairman & Chief Executive Officer

It means the prior comments were a journey and we were on that journey. As I told you when I started out here at Time Inc., we didn't sell anything as Time Inc. We sold ourselves as People, Sports Illustrated, Time, in fact there was only 25 people in the center of sales at Time Inc., who sold discounts, that's essentially what they did. They negotiated discounts with our largest advertisers, our top 25 advertisers.

So on the journey, we've started off – as I started into the marketplace understanding that Time Inc. was on this journey of one Time Inc. We did roll that out with our sales organization. We did talk about it throughout the organization, as we've said in the past, we had moved, we built a much larger central sales structure that really started selling centrally, we sold digital centrally, but not all brands were still selling it.

We had a small digital team in the center, we had a small team in the center that was working with our advertising agency partners, calling on them and creating larger bigger deals with them, which we've signed a bunch and we also started selling across the largest customers, we tried to sell Time Inc.

But we realized as we were going at that, there was a much larger opportunity here and so it's been a journey. Everything we said in the past was true, we just weren't finished with the journey. Every time we get into it, and every time we look at the opportunity, we're understanding that the opportunity is to really sell those larger audiences.

And if you look over the last two years of our journey, Facebook and Google have really come on fire. And they are out there pitching audiences, pitching metrics, really absorbing a large part of this move to mobile and when we started this journey two years ago, our audiences weren't really engaged to mobile as they are today.

Today, a good percentage of them are coming on our mobile devices and they're really doing that. So it's really about building out the quality of services that we had. We realized trying to sell video for Sports Illustrated and People just doing that, they're trying to sell digital for Sports Illustrated, People just doing that.

Even People Magazine, one of the largest magazines in the world, even its website isn't big enough to satisfy the needs of the customers who are used to buying hundreds of millions of UDs. And so we're competing against that now more aggressively in the marketplace and that really has turned up. And in response to that as we've been able to – as I said, is we've been able to build up our products and services, build up our audiences, we just felt it was time to make the full shift and really focus our advertising team on a full Time Inc. approach, selling the full range of services that cut across. So it really has been a journey. And if you go back and you see those comments, you'll see that they're consistent with the journey we're talking about.

Michael Francis McCaffery - Shenkman Capital Management, Inc.

Okay. Thanks. And can I just ask maybe a follow-up question to the Brexit comments as it relates to your modification and full year guidance? You indicated the currency impact represented about 150 basis point of the change?

Yeah. So let me address both points just to clarify, we're saying 150 basis points for the full year, so I'll call it $45 million, we're attributing about $20 million directly to Brexit, so we had already seen FX moving down during the year, so there's that incremental $20 that came directly from Brexit.

And that leads into your next question and – in the UK what we saw was a little bit of a pause before the Brexit vote. People were anxious to see what was going to happen. I'd say there was a modest slowdown in advertising, but not significant and actually lower than the rates we're seeing in the domestic brands. So the UK model was largely a newsstand model as well. So you're seeing more of the impact in the FX-related to newsstand and it's also an advertising impact there.

Michael Francis McCaffery - Shenkman Capital Management, Inc.

And is the situation still – that it's still going to (59:07) there that you saw pre-Brexit or has it started to thaw a bit?

I would say with certain advertisers it's falling and I'd say others are still looking. There's a lot activities in the financial sector right now. They're trying to decide, do they stay in UK or they move into Paris and Germany and other markets. And that stuff will be having an impact on what they're saying to their customers in the market and how they're advertising. Other sectors, the retail it seems to be less affected.

Michael Francis McCaffery - Shenkman Capital Management, Inc.

Thanks.

Operator

Thank you. Our next question is from Eric Katz from Wells Fargo. Your line is open.

Eric Y. Katz - Wells Fargo Securities LLC

Thanks. Good morning. I just wanted to piece together the guide a bit more. You seem to have another good quarter, particularly in cost. I believe you already had a full quarter of the acquisitions in Q2. So I'm running with the guide down and OIBDA is all revenue driven or if not why costs are expected to increase throughout the year, especially after the realignment and related cost efficiencies?

Yeah, Eric, I think as you guys modeled and certainly that was consistent with how we were looking at the year. We did expect some significant improvements in the second half of the year. And given what happened, Joe talked about and I talked about, really seeing the trends in June. It caused us to take a look at the second half of the year and then accordingly kind of push that revenue flow through Q3 and Q4.

So rather than a significant dropdown and improvement in revenues, we felt it was more appropriate to temper that. So that while we are improving in Q3 on the revenue trends it's not dramatically up as it would've needed to be to maintain the previous guidance. I mean, if you really look at Q2, from a guidance perspective we were bottom-line as you pointed out well in line or above most of the models, where we really fell off was in the revenues.

So had that revenues showed up there, we would've crossed the quarter and we would've had a different view on Q3 and then Q4. But call it, that $10 million revenue miss it just really, really impacts the model.

Joseph A. Ripp - Chairman & Chief Executive Officer

The other thing we're doing is, part of the restructuring it just allows us to be more efficient. Alan mentioned some of the efficiencies he can find on the editorial side. We are certainly finding efficiencies in the advertising side and the marketing side, PR – really you look across the organization we had a lot of people dedicated to individual brands that we're hoping that we can free up those resources to keep plowing back into our growth initiatives, keep plowing back and to try and find the revenue growth.

Jeff and I have said to you I think from the day one, we started this journey together that, we would constantly be looking at costs, constantly finding ways to be more effective, constantly find ways to take cost out of the legacy business as it declines to reinvest back in those areas for growth and we continue to do that, and we have – we've been certainly doing that today and we'll be doing that in 2017, 2018, 2019, that's a journey that will never stop.

Eric Y. Katz - Wells Fargo Securities LLC

Okay. And so costs are down overall but just not as much the revenue for now that was in the guide?

Joseph A. Ripp - Chairman & Chief Executive Officer

Yes.

Eric Y. Katz - Wells Fargo Securities LLC

And then, I guess, just looking at the incremental cost attributed to the new acquisition, is Viant really the bulk of those costs or just spread out, sort of, evenly among the quarter, spread out in some direction – or the other acquisitions?

Yeah. I'd say Viant is a significant amount of it, but it is spread out when you look at SI Play, look at the Cycling business, the Craft business, HelloGiggles. So, Viant is the large number, but the other ones were very significant as well.

Joseph A. Ripp - Chairman & Chief Executive Officer

Right, the other opportunity we've had too – we announced also on the call that we've consolidated all the Digital – all the brands under one leader, Rich Battista. Rich is really working with us on really pulling together our investment efforts and other growth efforts because he is really working very hard at finding what are those opportunities for growth, where could we invest, how could we take those brands to different places.

Alan and Rich have presented a whole series of very interesting ideas to me for Fortune Magazine that we can now go after and we can now pursue. And so there's a lot of, I think, opportunity as we start thinking and really focusing on where those big investments for these brands that we could take them forward. And Rich has a whole bunch of ideas that he's been working on as you know.

And having that video background is going to be very helpful. I am working with the native teams as Joe had talked about and with Alan and the sales folks as well.

Eric Y. Katz - Wells Fargo Securities LLC

Great, thank you very much.

Operator

Thank you, our next question is from Toni Kaplan from Morgan Stanley. Your line is open.

Unknown Speaker

Good morning. This is Patrick (01:04:00) in for Toni. Jeff, I believe you talked about potentially achieving positive revenue growth in 2017. And I'm wondering if that will be predicated upon completing incremental tuck-in acquisitions or whether you think you could achieve crossover on an organic basis?

Without getting into too much guidance, I would say, on what's in front of us, we feel that the expectation would be to incrementally grow. So there would be no large acquisition in there in order to do that.

Unknown Speaker

Thanks. And then you talked a bit about focusing more on winning, kind of, cross platform ad sales, and I'm wondering if that strategy has put additional pricing pressure on the Print Advertising business and whether you might be offering concessions on Print pages in order to win Digital business.

Joseph A. Ripp - Chairman & Chief Executive Officer

Well, that's the trick of the whole thing, right. But what you don't want to do is give away any of these new things for Print and we're not doing that. We're very focused on making sure that all of the incremental services are in fact, incremental services. There are – as we work into the Print field, the good news is that, the common wisdom is that Print is starting to work even better.

As we're working with customers for the new products and services, we are finding video is coming out of some other budgets, usually TV budgets. We're getting – the events business is coming out of other budgets that they have, the Digital business is coming out of the weaker digital competitors that are out there.

So it's really not affecting pricing on Print that I've seen so far. And I can tell you that it's going to be a lot easier for us to control that with a central sales organization, because pricing is also going to be centralized. And there'll be lots of rules on ways that people go about it.

But the opportunity for us always is to increase the amount of revenue, we're getting from the advertisers but I have not seeing any stimulation in Print pricing as a result of the changes we're making. What we're trying to get is greater share of the revenue of all the advertising spending from our advertisers.

And also very important that our sales forces is part of the realignment, really articulate the value that Joe talked about and make sure that those are embedded in our pitches and really get through to the advertising community because there is a lot of value that we think can be unlocked.

I think that'll do it. We really appreciate your time and if you have any follow-up any questions, please feel free to connect with us. And have a great day. Thank you.

Operator

That's concludes today's conference. Thank you for participating. You may now disconnect.

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